Raking up the Kashmir issue, Prime Minister Nawaz Sharif said on Thursday it is the "main source of tension" in Indo-Pak relations and sought its peaceful resolution to explore new ways to bolster bilateral ties.

"We want peaceful resolution of Kashmir with our full sincerity so that by removing this main source of tension, Pakistan and India could find new ways for promoting their relations," he said while addressing the Independence Day parade after midnight in Islamabad.

Sharif's remarks come close on the heels of a spat between the two countries over Prime Minister Narendra Modi's speech accusing Pakistan of continuing to engage in a proxy war of terrorism against India.

Pakistan and India have been involved in a war of words, with New Delhi saying terrorism was a "core concern" in bilateral ties and its "tool kit" is not restricted in any manner to combat it effectively.

Pakistan had dubbed Modi's comments as "baseless rhetoric" and "unfortunate".

In his address, Sharif said promotion of peaceful relations with neighbours is the cardinal principle of his foreign policy. "We are a peaceful country. We are striving for peace within the country and also want durable peace on our borders," he said.

Sharif also called for durable and permanent peace in Afghanistan so that the entire region could touch heights of progress of development.

The three services chiefs, ministers, diplomats, senior officials and business leaders were present at the ceremony held in the Parliament premises.